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Crédit Agricole Group's first-quarter 2018 results reflect a high level of activity, of very good quality in terms of customer penetration, margins and risks, and a decrease in the cost of credit risk and excellent cost control, both at organic level and in terms of acquisitions, for which the timing of synergies is accelerating. The results are nevertheless affected by the persistent impact of low interest rates on the interest margin of the Group's retail banks, and also by (1) the strategic refocusing, which is illustrated by a very penalising scope effect in relation to the same quarter last year, (2) a very negative exchange rate effect due to the depreciation of the dollar, and (3) a sharp increase in the contribution to the Single Resolution Fund (SRF). Net income Group share came out at 1,429 million euros, down -10.7%. There are a small number of specific items this quarter, with the related net positive effect of +76 million euros mainly resulting from the recognition of additional negative goodwill on the three Italian banks. Excluding these specific items, net income Group share came out at 1,352 million euros, down -18.3% relative to first quarter 2017. At constant scope and exchange rates5, it fell by -10.1%, and by just -4.2% based on the same method excluding the contribution to the SRF. The financial situation remains very solid despite the first-time application of IFRS9, which shaved -26 basis points off the fully-loaded Common Equity Tier 1 ratio, bringing it to 14.6%, but also brought the coverage ratio of impaired outstandings to 84%. Based on these two ratios, the Group shows one of the most solid balance sheets in the sector.
The first quarter of 2018 showed once again the relevance of the Crédit Agricole Group strategy implemented as part of the «Strategic Ambition 2020» medium-term plan, founded on a stable, diversified and profitable business model. Several of the business lines posted high levels of activity, of good quality in terms of margin and risks, based on growth in cross-selling, the scope of which was extended to include new products and services. The equipment rate for products distributed by Crédit Agricole S.A.'s specialised businesses rose across all retail banking networks, underpinning gains in market share. This development required investments, which have been absorbed by a very good operational efficiency.
The Group saw further progress in the realisation of its medium-term plan. As a reminder, since 31 March 2017, it has been streamlining its structure by selling non-strategic holdings, which included Eurazeo (all of its 15.4% stake) on 6 June 2017 and BSF (16.2% of the 31.1% stake owned, giving rise to its deconsolidation) on 26 September 2017. These disposals mean a reduction in the share of net income arising from the contributions of equity-accounted entities in favour of income controlled by the Group, but they weigh on growth in net income between the first quarter of 2017 and the first quarter of 2018 since the two entities contributed 143 million euros to the Group's net income Group share in the first quarter of 2017.
Crédit Agricole S.A.
Acquisitions: accelerated synergies
- Pioneer: synergy schedule revised (60% as of 2018 versus 40% in the initial plan)
- Three Italian banks: close to breakeven in Q1 (C/I ratio of 95.5% vs. 118% in Q4-17), ahead of the business plan
Results penalised by temporary effects related to strategic choices, exchange rates and increase in the contribution to the SRF
- Sale in 2017 of non-strategic entities that made a significant contribution to NIGS in Q1-17: Eurazeo (€77 million) and BSF (€67 million), ie -143m€ Q1/Q1 in NIGS
- Less risky CIB, which suffered from market conditions in Q1, highly selective, pick & choose approach, which helped to reduce RWA and cut capital consumption by -11% Q1/Q1
- Exchange rate effect: fall in US dollar (-14% vs euro Q1/Q1), -€35m in NIGS in Q1-18
- Sharp increase in contribution to the SRF: +24.2% or -€54 million to -€278 million in NIGS
Robust activity in multiple business lines
- High, good quality net inflows in Asset gathering and insurance
- Increase in penetration rate and volumes for Retail Banks and Specialised Financial Services
Excellent cost control
- Decrease in costs excluding SRF at constant scope and exchange rates 11: -0.7% Q1/Q1
- CASA’s cost/income ratio excl. SRF 63.3%
Strong results considering a high base effect from Q1-17
- High basis of comparison in Q1-17 for revenues in Insurance (stable vs. Q1-17, which was boosted by capital gains), CIB and LCL
- Underlying NIGS at constant scope and exchange rates11: +4.8% Q1/Q1, +8.7% excl. SRF
- Sharp drop in cost of risk despite the scope effect (Italy) and IFRS9
- Significant rise in coverage ratios after the first-time application of IFRS9 (CASA: 73% incl. Buckets 1+2 provisions)
Financial solidity: Fully-loaded CET1 stable after restatement for IFRS9
- Fully-loaded CET1 ratio: 11.4%, MTP target of 11% maintained
- First-time application of IFRS9: impact on capital (-€1.1 billion) and CET1 (-24bp)
- RWA stable year-on-year (-0.4%) despite integration of the acquisitions of the period (+€5bn)
About Credit Agricole:
PJSC «Credit Agricole Bank» is a modern universal bank owned by the leading financial group in Europe – Credit Agricole Group (France). The Group is a major partner of the French economy and one of the largest banking groups in Europe. It is a leading retail bank in Europe, having the largest portfolio of assets under management, being first in the field of ban insurance and third - in project financing in Europe. Credit Agricole has been operating in the financial market of Ukraine since 1993 and renders the entire range of banking services to private individuals, including premium-clients, and business. The Bank pays special attention to cooperation with agricultural enterprises. Reliability and business reputation of Credit Agricole in Ukraine is confirmed by the highest possible FITCH ratings, leading positions in bank sustainability, bank deposit reliability and bank profitability rankings, as well as by 300 000 active private and 18 000 corporate customers, including international corporations, large Ukrainian companies and representatives of small and medium business.
Viktoriia Torianyk, Head of PR and corporate communications Credit Agricole Bank.
Phone: +38 044 581 07 45, e-mail: Viktoriia.Torianyk@credit-agricole.ua